Market Insider

Wheat Rebounds on Demand Optimism

Wheat markets tried to rebound last week as the complex continued to digest the potential implications of Australia’s smaller wheat crop as well as news that China would cut import tariffs on U.S. agricultural goods.

Staying global, Coceral is expecting EU and UK combined grain and oilseed production to come in at 302.7 MMT in 2020, down about 6 MMT year-over-year. The decline, centered in wheat production falling 5% to 137.9 MMT, is mainly blamed on the wet weather seen in the fall in Germany, France, the UK, and Denmark. French wheat production is pegged at 35.7 MMT, a 10% downgrade from harvest 2019, while the German wheat harvest is expected to be 3% smaller at 22.2 MMT. In eastern regions, Coceral is estimating that Romania will produce 9.1 MMT of wheat (+15% year-over-year) while Polish farmers will take off 11.7 MMT, a slight bump from last year’s haul.

Pushing east, ProAgro is expecting Ukraine’s grain harvest to fall 3.2% to 72.7 MMT from the record 75.1 MMT that came off in Harvest 2019. [3] This includes the wheat harvest dropping by 7.3% to 26.2 MMT but corn production likely staying flat with just under 36 MMT expected to be cut. Next door, the Russian wheat crop should be about 3-5% higher than last year’s 73.5 MMT, which would make it the second-largest wheat crop ever, according to the country’s Deputy Ag Minister.

Last week, the USDA came out with their first estimates of acreage estimates for Plant 2020 by American farmers. Going into the report, traders were expecting to see 44.9M acres of wheat but the USDA said that 45M acres would be seeded (including winter wheat that was planted in the fall). From a 2020/21 demand perspective, things are fairly similar for U.S. to the 2019/20 crop year. However, thanks to the lower acres and similar exports, wheat stocks are estimated by the USDA to fall to a 6-year low of 777M bushels (or 21.15 MMT if converting bushels into metric tonnes).

Coming back to Western Canada, the biggest headlines impacting grain markets in Canada has been the blockade of railroads across the country. This past Friday, Canadian Prime Minister finally called for the dismantling of the blockades, basically giving the go-ahead to law enforcement to finally be able to do their job. That said, it doesn’t make up for the estimated $9M CAD/day in grain demurrage costs and the thousands of workers that CN and Via Rail temporarily laid off this past week.

The Canadian Grain Monitor Program from this week notes that the number of ocean grain vessels waiting in British Columbian ports is nearly double the normal average. Specifically, through week 28 of the Canadian 2019/20 crop year, 40 boats were lined up in Vancouver (average is 24) while 10 boats were sitting in Prince Rupert (double its average of 5). While some elevators have gone no bid or have pushed back some deliveries, country elevator grain movement hasn’t dropped off too, too much. Accordingly, wheat prices moving lower is likely attributed to seasonality more than anything at this point. However, should there be further logistical disruptions, you’ll likely start to see it on the bid sheets.

 

 

 

 

 

 

 

 

 

 

 

 

 





To growth,

Brennan Turner 

President & CEO | FarmLead.com